The world of home loans and lending can become a bit complicated as soon as borders get involved. This is true even in countries that share a border, language, and similar culture, like a Canadian applying for a mortgage in the USA. The process of applying for a home loan or mortgage in the USA can be very time-consuming and frustrating for nonresidents.
Banks, brokers, and loan providers are at the heart of the issue. As each country has slightly different rules and regulations, the communications and process becomes complicated.
A Brief Market Overview Before We Dive into the Issue
With rampant inflation expected, the real estate market in the United States and most of the world has gone a bit wild. Even after the investor finds a property that suits their needs and budget the process is a bit tough and there is a lot of competition. There is a low supply of available properties in relation to prospective buyers. In today’s world that causes active bidding wars on many properties in the United States. Some make offers above the asking price, and others may make cash offers to get an edge and close a deal quickly.
The time consuming process of applying for a home loan or funding with a broker is unsuitable for many investors. That and there is also the chance that their loan won’t be approved or will be at much higher rates. Regardless, in today’s market by the time the investor receives a response, the property is usually purchased by another bidder. This leaves the investor without property and forces them to go through the entire process with the broker again.
Mortgage rates have already risen this year in a bid to fight inflation and have priced in additional rate hikes anticipated this year. This current trend of rising rates is causing much frustration as, by the time an investor receives a response from a mortgage broker, the rates might have changed.
Last but not least, real estate prices are increasing dramatically every month. By the time the investor receives a response from a broker, the asking price for the property may have also increased.
The Process for a New Purchase
An international real estate investor may use the service of a broker to shop around for a good mortgage offer with convenient terms. A mortgage broker will turn to a number of lenders to provide an initial offer for the international investor.
A mortgage broker earns a commission by forwarding the investors details to a mortgage lender who then closes the loan. The problem is that the broker is not the decision maker, the mortgage lender is and has the final word regarding rates and approval.
According to many international investors that have applied via a broker have reported a very long wait period taking months sometimes and often ending with no results. This is mostly due to the lenders’ inability to underwrite and determine the risks involved with an international investor. If approved initial terms might change to less favorable rates by the time of final approval.
Either result is less than satisfactory in the real estate world of 2022.
Brokers & Refinancing
Refinancing an existing property is a bit different than purchasing a new one in more than a few ways. Time can still be a major issue if the investor is using refinancing as a tool to purchase an additional property. Rising interest rates are another factor that can be a bit of a problem. As previously mentioned, interest rates are due to rise
Applying for a loan via a mortgage broker can be a lengthy process, whether it is your first purchase or are refinancing a property. If an investor plans on refinancing an existing property to buy another property, applying through a broker may not be a suitable choice. This is due to time constraints that revolve around purchasing a new property in these market conditions.
Solutions for International Investors
One obvious solution for international real estate investors is to make a cash offer to purchase a property. While this can be preferable for some, there are a few major drawbacks. The first of which is with rising real estate prices, a large amount of capital would be required. This could potentially block many from investing in real estate. It may also limit the scope or number of properties that the investor planned on purchasing. By using leverage and funding, investors can reduce risk by purchasing multiple properties for the same initial cash investment. This allows investors to develop a real estate portfolio.
Another slightly more flexible option is taking advantage of specialized mortgage lenders. Specialized lenders can provide tailor-made solutions for investors, including international investors. Using our services at USA-Morgages, investors can receive a preapproval letter within 1 business day. In addition to that funding can be provided fast. As a direct lender funding. With our services, international investors can sidestep many of the issues in the world of real estate. In addition to that, there are no additional brokerage fees, hidden charges and our customer care is key!